Joe Waters interviews Eric Rauchway on the Great Depression, the New Deal, and democracy in crisis.
Recently the Labor Department reported that 20.5 million Americans lost their jobs in April, the IMF forecasted a 3% retraction in the global economy due to Covid-19, and a report from the World Food Programme warned that the number of people experiencing hunger could soar from 135 million to more than 250 million worldwide. The global pandemic and its associated economic impacts have led many analysts to compare this moment to the Great Depression of the 1930s. And, as people make comparisons to the Great Depression, they are searching for another New Deal to lift us out of it.
A professor at the University of California, Davis, Rauchway is one of the leading historians of the Great Depression and the New Deal. He is the author of Winter War: Hoover, Roosevelt, and the First Clash Over the New Deal (2018), The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace (2015), and The Great Depression and the New Deal: A Very Short Introduction (2008), among other titles. Prior to joining the faculty at UC Davis in 2001, he was University Lecturer in Modern History at the University of Oxford.
The following conversation on the comparisons between the Great Depression and our current pandemic-induced economic decline, Franklin Roosevelt’s democratic principles, and the role of a competent government in preventing authoritarianism has been edited for length and clarity.
Joe Waters: Let’s start with the current moment. There are lots of analogies made between our current economic reality and the Great Depression. Are they warranted and do we need a new New Deal?
Eric Rauchway: Well, I would separate those two things out. I think in the first case, there are some reasons to look at comparisons between the current moment and the Great Depression because the reported unemployment rate is at a level we haven’t seen since the Great Depression. There are lots of ways to count unemployment, but since we’ve been counting it in a fairly consistent way, roughly since the end of World War II, it’s never been this high. So we have soaring unemployment and that’s coupled with tremendous income and wealth inequality. That was certainly the case in the late 1920s and early 1930s, at the time of the Great Depression.
I’d add that the apparent robustness of our economy in recent years has masked some underlying problems where middling and poorer people never really recovered from the previous crisis. That was true in the Great Depression as well. In those days, it was family farmers who’d never really recovered after World War I and who accounted for a very large section of society. I think today it is also true that an awful lot of people never really recovered from the 2008-2009 recession.
“I’d add that the apparent robustness of our economy in recent years has masked some underlying problems where middling and poorer people never really recovered from the previous crisis. That was true in the Great Depression as well.”
Those are some of the obvious similarities, but there are also some differences. First of all, we didn’t just slide into this economic crisis. This was a calculated and indeed rational response to the pandemic and obviously the Great Depression was nothing like that. There was the bursting of a speculative bubble and the evaporation of credit that precipitated that crisis. Right now, the question is, if we stop doing what we’re doing (that is to say, if we all went back to work), would the economy snap back to normal? Setting aside the public health question, which I don’t pretend to be an expert on, I think strictly from the comparison point of economic history, there’s reason to doubt even that. Even in the short time we’ve been sheltering in place, businesses have suffered, small businesses particularly, and a lot of jobs just aren’t there to go back to, so the idea of it just snapping back like a rubber band is probably a bit too optimistic.
Therefore, the question is: do we need something like a New Deal? Well, a lot of people have been saying we need something like a New Deal, even before this crisis. That was in response to the climate crisis, which is global. The original New Deal ultimately had to take on global proportions and the idea was that a green New Deal would have to do that too. The United States would need a very considerable overhaul of its power-generating infrastructure and, I’m afraid to say, its flood management infrastructure to meet the exigencies of the current moment. The idea was that this would require public investment and coordination. So there were natural analogies in the Green New Deal to the original New Deal’s public works program and to the original New Deal’s ambitions of reshaping the way Americans lived.
I think people forget this, but in 1932, there was a climate crisis also. There was the Dust Bowl and there was a very well informed consensus opinion that it resulted from people living and farming in the wrong places, using unsustainable techniques, and that the whole way in which Americans lived and exploited the land needed to change. The New Deal did change it in a variety of ways. You could say that the original New Deal qualifies as a “green” New Deal.
“I think people forget this, but in 1932, there was a climate crisis also. There was the Dust Bowl and there was a very well informed consensus opinion that it resulted from people living and farming in the wrong places, using unsustainable techniques, and that the whole way in which Americans lived and exploited the land needed to change. The New Deal did change it in a variety of ways. You could say that the original New Deal qualifies as a “green” New Deal.”
There was, therefore, an existing argument for why the United States and indeed the world should undertake something like a New Deal before this pandemic moment. Now we have an economic catastrophe piled on top of that. In effect, that also parallels 1933. There were a lot of people already arguing that there needed to be considerable social policies, investments, and public infrastructure before the Great Depression, and then the Great Depression provided a more urgent argument for doing those things. Damming up the Tennessee River, for example, was already something that people were talking about long before the Depression and using that power to generate electricity for people who didn’t have it.
There’s been a lot of (virtual) ink spilled recently on returning to normal or achieving a “new normal” but Roosevelt was not interested in returning to normal in 1933, was he?
No, he was not, and it wasn’t just Roosevelt. There was a fairly widespread belief that the 1920s, which we think of as the Roaring 20s, the era of the Great Boom, the Jazz Age, masked a considerable and increasing inequality and concentration of wealth, and the concentration of control of business, which was very concerning to a lot of people. There was a sense that this inequality wasn’t something that the United States should go back to, but rather that we should go forward to something better.
Roosevelt was striving for more democracy and ownership (through the development of electric co-ops, for example) something that was missing from the 2008-2009 stimulus. Can you help us understand how Roosevelt viewed his mandate and why he was interested in expanding democracy at such a crucial moment in our national history?
“It’s very important to mention that Roosevelt, the people who voted for him, and the people who worked with him weren’t ever thinking just in terms of the economy. They were thinking in terms of democracy, because at that moment, democracy was under threat worldwide.”
Roosevelt himself said that explicitly. He said people talk about a return to the good old days, but he had his doubts about how good the good old days were and felt that we needed to look forward to new and better days. The idea was to make the American economy more equitable and indeed to make American politics more equitable—to give people who didn’t have a voice, a voice.
It’s very important to mention that Roosevelt, the people who voted for him, and the people who worked with him weren’t ever thinking just in terms of the economy. They were thinking in terms of democracy, because at that moment, democracy was under threat worldwide. This was the same time when the Nazis came to power in Germany, Mussolini was already in power in Italy, there were a number of antidemocratic movements around the world and a lot of people in the United States were saying that the Depression proved that democracy was done for. Roosevelt had the explicit agenda of proving that idea wrong. He thought that all of this public investment was obviously a means of giving people work and putting money in people’s pockets without subjecting them to the indignity of the dole, as he called it. He wanted to give people work, but he also wanted to show that the government could work for the vast majority of people and, therefore, people need not abandon faith in the American system of government.
We need to keep in mind that Roosevelt was a Democrat as well as a “small d” democrat. The Democratic Party was beholden to the votes of segregationist southerners to assemble an electoral college majority as well as a congressional majority. A big problem for Roosevelt’s commitment to equity and democracy is that he had to have the votes of a substantial number of folks who were not entirely committed to democracy, at least across the color line. He observed on many occasions that this was a problem of his and he did a deal with that particular devil in order to overcome, in his view, a greater evil. However, we’re not talking about somebody who was morally uncompromised.
You’re absolutely right that he and his administration were very concerned with economic democracy, expanding home and farm ownership, and shoring up home ownership and land ownership when he could. This focused also on trying to move people to more sustainable modes of production in the countryside and actually build model communities that would be self-run and would have cooperative forms of government. The Tennessee Valley Authority was structured around that idea and would foster the creation of cooperative government for public utilities throughout the Tennessee River valley.
You’ve written that “Roosevelt met economic crisis with massive public works programs that gave the dignity of employment to millions of Americans, and—more importantly in that era of rising fascism—helped restore their faith in the U.S. government’s ability to meet their needs.” There has been a lot of focus in recent years on the reemergence of authoritarians on both the left and the right. Help me understand the importance of a competent government leading us to meet the challenge of a national crisis in preserving our country from authoritarianism.
Well, in 1932-33 it was vividly apparent to a lot of people that incompetent government led to the rise of authoritarianism, and the example that a lot of people had in mind was, of course, Weimar Germany. The Weimar Republic was a government that had just failed, that was ridden by corruption, and therefore had utterly lost the faith of its citizens, whatever their original political position had been. Therefore it was ripe for the rise of Hitler. Hitler’s argument was, in part, that the existing government, the existing constitution, was hopelessly corrupt and incompetent. It was really hard to argue against that.
“To avoid the temptation to authoritarianism, Roosevelt believed that we needed to prove that the government could act in people’s interests, not just bail out the rich, but genuinely work for its citizens, whatever their political affiliations.”
Roosevelt was very attuned to that. Roosevelt read and spoke German and had spent time in Germany as a kid. He was better able than most people to have a sense of what was going on in Germany. He had a copy of the first English translation of Mein Kampf, which came out in 1933. The Nazi press authorities insisted that it be heavily expurgated to take out a lot of the more anti-Semitic passages because they did not want English-language readers reading them. Roosevelt was aware of this. He wrote in the flyleaf of his own copy that there was a lot missing from the English edition and that if more people were aware of Hitler’s anti-Semitism, they would be more alarmed.
To avoid the temptation to authoritarianism, Roosevelt believed that we needed to prove that the government could act in people’s interests, not just bail out the rich, but genuinely work for its citizens, whatever their political affiliations.
As governor of New York, Roosevelt had established a somewhat redundantly named Temporary Emergency Relief Administration to provide public works and public employment to the state. It was very clearly structured around the idea that work was ennobling to laborers and to society. He was very opposed to the idea of simply providing cash payouts to the poor. He thought that cash payouts were demeaning, not least because the standard way of doing it was “means testing.” You had to be interviewed by a social worker to establish that you were really deserving of such aid and your life had to be pried into by somebody acting on behalf of the state. Roosevelt thought it was much better simply to give somebody a job and pay them a wage for that job. That’s what TERA was set up to do. They would give in-kind aid, like food, to people who really were starving, but they wouldn’t give out money.
The same concept was transferred into federal works. After Roosevelt was elected president, the Works Progress Administration was designed on the same principle: that you give somebody a job, pay them a decent wage, and then you don’t have to do all of the demeaning things to pry into their lives. They were very big on the idea of work relief, or jobs creation, rather than a dole.
The New Deal put some harnesses on big business that recent federal actions have undone. It’s well established that the 2008-2009 stimulus bailed out big business without imposing firm restrictions to address inequality or prosecute corporate malfeasance, for example. How did Roosevelt approach big business and what are the implications for our current efforts to bail out the economy?
It is important to note that in the 1930s Roosevelt was critiqued from the left, and indeed, for generations afterwards, scholars and activists on the left were very unhappy with him for not going further. He was not a socialist, he did not nationalize business, and he left the capitalist system largely intact, just in a harness.
Over time, those restraints have eroded. We saw it first with the savings and loan industry, and then with banking more generally, which was deregulated beginning in the late 70s, and extending right through the Clinton administration. The neoliberal case for deregulation was that in the middle of stagflation in the 70s, the problem was that we were not enjoying the full innovative capacities inherent to capitalism. So we needed to deregulate transportation, the financial industry, trucking, the airline industry, and so forth. A result was a lot of consolidation and mergers and acquisitions that led to a huge investment banking boom in the 1980s, which a lot of people thought proved the case for deregulation.
Then, of course, all of these businesses started either misbehaving or falling apart. I’m not sure that anyone is quite as enthusiastic about that argument today as they once were, but I think that was still the argument that prevailed within the Obama administration, largely speaking: we need to push enough money into the system to shore up the crumbling banks and to stimulate consumer purchasing power and then the ship will right itself. That was both true and not true. The ship did right itself, but they left a lot of the underlying problems unaddressed.